The Phantom Share Agreement is utilized when companies want to provide employees with the economic benefits of share ownership while maintaining existing shareholding structures. This document type is particularly relevant in Pakistan where companies seek to implement incentive schemes without the complexities of actual share issuance. The agreement typically details the number of phantom shares granted, vesting schedule, valuation methodology, and payment terms. It's commonly used by private companies, family-owned businesses, or subsidiaries of international corporations operating in Pakistan where direct equity participation might be restricted or impractical. The document must comply with Pakistani corporate law, securities regulations, and tax requirements while providing clear mechanisms for calculating and distributing the economic benefits associated with phantom shares.
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1. Parties: Identification of the company and the participant receiving phantom shares
2. Background: Context of the agreement and purpose of the phantom share scheme
3. Definitions: Key terms used throughout the agreement including 'Phantom Shares', 'Vesting Date', 'Valuation Date', etc.
4. Grant of Phantom Shares: Number of phantom shares granted and basic terms of the grant
5. Vesting Conditions: Timeline and conditions for vesting of phantom shares
6. Valuation Mechanism: Method for calculating the value of phantom shares
7. Payment Terms: Timing and method of payments for vested phantom shares
8. Termination Provisions: Effects of employment termination on phantom share rights
9. Restrictions and Limitations: Limitations on transfer, assignment, and other restrictions
10. Tax Provisions: Treatment of tax obligations and responsibilities
11. Confidentiality: Obligations regarding confidential information
12. Governing Law and Jurisdiction: Specification of Pakistani law as governing law and jurisdiction
13. General Provisions: Standard boilerplate clauses including amendments, notices, and entire agreement
1. Change of Control Provisions: Include when company anticipates potential merger or acquisition scenarios
2. Clawback Provisions: Include when company wants right to recoup payments in cases of misconduct
3. Non-Competition and Non-Solicitation: Include when additional restrictive covenants are desired
4. International Compliance: Include when participant may be subject to foreign laws
5. Shareholder Rights: Include to explicitly state lack of actual shareholder rights
6. Dispute Resolution: Include when specific arbitration or mediation procedures are desired
7. Currency Conversion: Include when payments might be made in foreign currency
1. Schedule 1 - Grant Details: Specific details of phantom share grant including number of shares and grant date
2. Schedule 2 - Vesting Schedule: Detailed timetable of vesting dates and conditions
3. Schedule 3 - Valuation Formula: Detailed methodology for calculating phantom share value
4. Schedule 4 - Notice Forms: Template forms for various notices under the agreement
5. Schedule 5 - Tax Treatment: Detailed explanation of tax implications and calculations
6. Appendix A - Acceptance Form: Form for participant to accept the phantom share grant
7. Appendix B - Exercise Notice: Form for participant to exercise vested phantom shares
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